On February 28, 2022, the Treasury Department issued prohibitions related to transactions involving certain financial institutions in Russia, including the Central Bank of the Russian Federation.1 The directive specifically prohibits a U.S. person (unless otherwise permitted or licensed) from engaging in any transaction involving listed financial institutions, including any transfer of assets to such entities or any foreign exchange transaction for or on behalf of of these entities. Under the guideline, the prohibitions are specifically worded to include: (1) any transaction that evades or avoids, is intended to evade or avoid, results in, or attempts to violate, any of the guideline’s prohibitions ; and (2) any conspiracy formed to violate any of the guideline’s prohibitions.
In particular, the Prohibited Activities do not expressly preclude any US Person’s dealings with Rospatent. And although the United States Patent and Trademark Office (USPTO) has discontinued any direct engagement with Rospatent for carrying out activities such as the use of the Global Patent Prosecution Highway (GPPH) program2, Rospatent is not currently a sanctioned entity under the directive. This, however, is essentially a distinction without difference. Moreover, since the USPTO (as well as the European Patent Office) has already severed its ties with Rospatent, there is still the possibility that Rospatent itself will be added to the sanctions at a later date and thus completely eliminate any prosecution by American persons with Rospatent.
The current sanctions directly affect entities seeking patent protection in Russia since payments for required fees related to patent applications and granted patents in Russia are processed by the Central Bank of the Russian Federation. This includes a number of financial transactions, such as paying government filing fees for direct filing of a patent application in Russia or national phase filing of an international PCT application in Russia, as well as incidental costs incurred in the prosecution of pending Russian patent applications and payment of annual maintenance fees for granted Russian patents. This would also include payment of annual maintenance fees for patents obtained through the Eurasian Patent Organization (EAPO) and maintained in Russia since such fees paid to the EAPO must be forwarded to Rospatent. Due to Rospatent’s intertwining with the Central Bank of the Russian Federation, all fees paid to Rospatent should be considered equivalent to conducting a transaction through said bank.
Pursuing patents in Rospatent requires engagement with a Russian patent practitioner. Although US entities pursuing patent interests in Russia are unlikely to directly engage Rospatent and pay fees that are ultimately processed by the banned bank, it is clear from the directive that strategies, such as Routing of payments through sanctions-neutral countries is prohibited. As noted above, the directive prohibits any transaction that “evades or avoids” the other prohibitions of the directive, as well as any transaction that “aims to evade or avoid” the other prohibitions. This language appears to have the potential to trap deliberate non-compliance as well as actions that unintentionally end in non-compliance (eg, forgetting to interrupt the automated payment of a patent maintenance fee to Rospatent).
Deadline for administrative transactions
US entities still have time to complete administrative transactions with Rospatent despite the implementation of the directive in February. On March 2, 2022, the Treasury Department issued a blanket license authorizing certain transactions that are otherwise prohibited by the directive.3 The license authorizes U.S. persons to pay taxes, fees, or import duties, and to purchase or receive permits, licenses, registrations, or certifications to the extent such transactions are prohibited under the directive. , provided that these transactions are usually incidental and necessary to the day of these persons. – daily operations in the Russian Federation. For at least U.S. entities whose day-to-day operations include securing and maintaining intellectual property, including in Russia, this license provides a window to conduct business and avoid violation of the directive. Currently, the transaction window provided under the license runs until 12:01 a.m. Eastern Daylight Time on June 24, 2022.
Development of a Russian patent strategy
Russia’s incursion into Ukraine has been underway for just over a month, but there is no way of knowing when hostilities might end. Moreover, even when peace is achieved, it is impossible to know how long the current sanctions against Russia will be able to continue. Those familiar with patent law know that obtaining patents is a time-driven business, and the uncertainty of time quickly shatters the paradigm. A ‘wait and see’ approach therefore has the potential to result in loss of patent rights as well as possible liability for knowingly or unknowingly engaging in activities which are prohibited by the Directive. Anyone engaged in patent activities in Russia would therefore be encouraged to undertake a review of their portfolio and use the remaining time under the general license to develop a plan to ensure compliance with current sanctions. This can include at least the following.
Anyone engaged in patent activity in Russia would therefore be encouraged to undertake a review of their portfolio and use the remaining time under the general license to develop a plan to ensure compliance with current sanctions.